FORTUNE EQUITY BROKERS (INDIA) LIMITED
ANNUAL REPORT 2010-2011
DIRECTOR'S REPORT
Dear Members,
Your Directors have pleasure in presenting the Seventeenth Annual Report
and Audited Accounts on the business and operations of the Company for the
year ended March 31 2011.
Financial Highlights (Rupees in lacs)
2010-11 2009-10
Total Income 5,933.66 4,909.27
Profit before depreciation,
amortisation and tax 498.13 1,518.99
Depreciation & amortization 258.38 266.78
Profit before tax 239.75 1,252.21
Provision for tax - Current tax 138.05 408.98
- Deferred tax (44.12) (29.38)
Profit after tax 145.82 872.61
Balance brought forward from
previous year 711.32 217.62
Tax in respect of earlier
years (Net) 35.95 0.02
Balance available for
appropriations 821.19 1,090.21
Transfer to general reserve 14.58 87.26
Dividend - Equity shares 66.60 233.10
- Preference shares 16.25 16.17
Dividend distribution tax 13.76 42.36
Balance carried to balance sheet 710.00 711.32
Weighted average number of
equity shares 16,650,000 15,150,726
Nominal value per share
(in rupees) 10.00 10.00
Basic and diluted earnings
per share (in rupees) 0.76 5.63
Financial Performance
For the financial year ended March 31 2011, your Company earned profit
before tax of Rs.239.75 lacs as against Rs.1252.21 lacs in the previous
year. The profit after tax was at Rs.145.82 lacs as against Rs.872.61 lacs
compared to the previous year. The total income for the year under
consideration was Rs.5,933.66 lacs as against Rs.4,909.27 lacs in a
previous year.
Dividend
A dividend of Rs. 0.40 per share on 1,66,50,000 equity shares of Rs.10 each
has been recommended for payment aggregating to Rs.66.60 lacs, subject to
approval of the members of the Company.
Your Directors also recommend a dividend on redeemable cumulative
preference shares as per the contracted rates aggregating to Rs.16.25 lacs
subject to members' approval at the annual general meeting.
After the stupendous recovery in FY10 when the S&P CNX NIFTY returned a
growth of 73.8%, normal service resumed in FY11 as the index exhibited a
modest return of 11.1% only. The aggregate markets suffered some setbacks
in the first quarter of FY11 and then staged a recovery which went till the
fag end of the third quarter of FY11 before succumbing to the growing
concerns regarding inflation and slowdown in economic growth in the last
quarter of the year.
The above-mentioned developments in the equity markets had an impact on the
aggregate turnover as well. Overall daily turnover in equity markets
declined by 18.4% from Rs.22,547 crores in FY10 to Rs.18,397 crores in FY11
as the lack of appreciable movements in the equity markets and the
increasing bearish sentiments prevented the market participants from
increasing their allocation to equities. Both the BSE and the NSE suffered
a decline in average daily turnover by 22.8% and 16.9% in FY11
respectively.
Cash Market Turnover Declines
Year BSE NSE Total
FY08 6,264 14,097 20,361
FY09 4,501 11,272 15,773
FY10 5,637 16,910 22,547
FY11 4,349 14,048 18,397
Source: Business Beacon, CMIE
Wholesale Debt Market (WDM)
Indian wholesale debt market is at Rs.6 lakh crore market. Government
securities (G-sec) hold a major share of approx 54% of total traded value
and 60.8% of total market capitalization. RBI regulations require banks to
keep a min 25% SLR which is the major reason behind the popularity of G-
sec. Also the less developed corporate bond market helps G-sec to take a
major share of bond market. The share of top 10 securities in total trade
value is steadily decreasing over the years signaling a more broad based
market evolution. In year 2010-11 the share of top 10 securities accounts
for 38.6% as compared to 53% in 2007-08. Indian debt market is the third
largest in Asia, yet the volumes are abysmally low. Last year the average
turnover was 1.67% of total market cap which is significantly lower than
other developed markets.
Market Capitalization as on March-31, 2011
(Rs. in crores)
Security Type No of Mkt Cap % age of
Securities total
G-Sec 120 21,857,214.04 60.8
PSU Bonds 852 1,909,215.79 5.31
State Loans 1,388 6,220,693.14 17.3
Treasury Bills 54 1,376,770.32 3.83
Local Bodies 19 30,283.16 0.09
Fin Inst 361 1,009,923.62 2.81
Bank Bonds 518 1,836,669.94 5.11
Supranational Bonds 1 3,912.22 0.01
Corporate Bonds 1,166 1,704,089.28 4.74
Total 4,479 35,948,771.51 100
Source: NSE Website
There are normally two types of transactions, which are executed in the
Wholesale Debt Market. An outright sale, or purchase and a repo trade. Over
the last five years the growth in volume in repo trade has outperformed the
direct sale.
Trading members dominated the WDM segment with a share of 60.8% in total
turnover in 2010-11 as compared to 49.3% in 2009-10. The share of foreign
banks in the total turnover is consistently increasing over the years while
Indian banks share has declined.
Mutual Funds
The year FY11 was witness to the launch of 518 schemes - substantial growth
over the previous year and one of the highest in the past decade.
The significant increase in the number of schemes allowed the industry to
limit the decline in aggregate sales of mutual funds to 11.5% only. But the
trend of significant redemptions which started in FY10 continued unabated
and the industry suffered redemptions of Rs.8,908,921 crores in FY11 - a
10.4% decline over the level witnessed in FY10. Thus, the industry suffered
a significant decline in net resource mobilization by Rs.49,406 crore in
FY11 - significant change from the increase in net resource mobilization of
Rs.83,081 crores in FY10.
(in crores)
Year Sales Redemptions Net Resource
Mobilization
FY05 840,694 837,508 3,186
FY06 1,099,559 1,045,336 54,223
FY07 1,938,592 1,844,512 94,080
FY08 4,464,376 4,310,575 153,801
FY09 5,426,353 5,454,650 (28,297)
FY10 10,019,023 9,935,942 83,081
FY11 8,859,515 8,908,921 (49,406)
Source: Business Beacon, CMIE Fixed Deposits
The company has not accepted any deposit from the public during the year
under review, to which the provisions of section 58A of the companies Act,
1956 and the rules made there under would apply.
Internal Control Systems & their adequacy
The Company has in place adequate systems of internal control that are
commensurate with its size and nature of the business and documented
procedures covering all financial and operating functions. The Company
being a service industry, it has in place clear processes and well-defined
roles and responsibilities for its staff at various levels. The management
has a defined reporting system, which facilitates monitoring and adherence
to the process and systems in place.
Directors
Mr. Ramesh Venkat retires by rotation as a Director at the forthcoming
annual general meeting and being eligible, offers himself for re-
appointment.
Auditors
M/s. Nipun Sudhir & Associates, Chartered Accountants, Mumbai the statutory
auditors of the company hold office up to the conclusion of this annual
general meeting and are recommended for re-appointment. The Company has
received a certificate under Section 224 (1B) of the Companies Act, 1956
stating that the appointment, if made, will be within the limits specified
in that section.
Auditors Report
The notes to the accounts referred to in the Auditor's Report are self
explanatory and therefore do not call for any further explanation on
auditors observations, as required under section 217(3) of the Companies
Act, 1956.
Audit Committee
In terms of Section 292A of the Companies Act, 1956, the Company has audit
committee of the board of directors in its place.
The audit committee consists of three members viz. Mr. J. T. Poonja, Mr.
Nimish C. Shah and Mr. Ramesh Venkat. Mr. J. T. Poonja is the Chairman of
the committee.
Remuneration Committee
In terms of provisions of Schedule XIII of the Companies Act, 1956, the
Company has remuneration committee of the Board of Directors, which
consists of three members viz. Mr. J. T. Poonja, Mr. Nimish C. Shah and Mr.
Ramesh Venkat. Mr. J.T. Poonja is the Chairman of the committee.
Conservation of Energy, Technology Absorption
The information required under section 217 (1) (e) of the Companies Act,
1956 read with the Companies (Disclosures of Particulars in the Report of
the Board of Directors) Rules, 1988 with respect to the matters specified
therein are not applicable to the Company.
Foreign Exchange Earnings and Outgo
The details of foreign exchange earnings & outgo are provided in Notes
forming part of accounts.
Particulars of Employees
A statement under Section 217 (2A) of the Companies Act, 1956 read with the
Companies (Particular of Employees) Rules 1975, as amended by the Companies
Amendment Act, 1988 is annexed as Annexure I and forms part of this report.
Directors' Responsibility Statement
Pursuant to Section 217 (2AA) of the Companies Act, 1956, to the best of
their knowledge and belief confirm that:
* In the preparation of the annual accounts, the applicable Accounting
Standards have been followed with explanation for deviation, if any;
* Appropriate accounting policies have been selected and applied
consistently, and such judgments and estimates that are reasonable and
prudent have been made so as to give a true and fair view of the state of
affairs of the Company as at end of the financial year and of the profit of
the Company for the year ended on that date.
* Proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956 for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities; and
* The annual accounts have been prepared on a going concern basis.
Acknowledgement
Your Directors are pleased to place on record their deep appreciation
towards the sincere services and co-operation extended by employees of the
organization at all levels. They also wish to place on record their
gratitude for the confidence placed in them by the banks they are
associated with. Further, your Directors wish to thank the various
departments of the Securities and Exchange Board of India (SEBI) and
National Stock Exchange of India Ltd. (NSE), Bombay Stock Exchange Ltd.
(BSE), MCX Stock Exchange Limited, Central Depository Services (India)
Limited, Association of Mutual Funds of India, business associates and
clients for their valued co-operation.
On behalf of the Board
J.T. Poonja
Chairman
Place: Mumbai
Date : May 26 2011
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